Company May be Held Liable for Budget Cuts' Safety
Effects

February 20, 2007 (PLANSPONSOR.com) - The Illinois
Supreme Court has ruled that a parent company may be held
liable for worker injuries at a subsidiary company when it
directed budget cuts that created unsafe
conditions.

Business Insurance reports that t
he high court said in its opinion “direct participant
liability” is a valid theory of recovery when “a
parent company mandated an overall business and budgetary
strategy and carried that strategy out by its own specific
direction or authorization, surpassing the control
exercised as a normal incident of ownership in disregard
for the interests of the subsidiary.” The court also
found that workers’ compensation’s exclusive remedy
does not apply in the situation.

The widows of two mechanics in a fire at a refinery
owned by Clark Refining & Marketing sued the company
claiming Clark operated its refinery under a low-cost
strategy that it knew would adversely affect safety by
forcing training and maintenance reductions, according to
Business Insurance. A trial court granted summary
judgment to Clark, but a state appeals court reversed the
trial court decision.

Clark
petitioned the Illinois Supreme Court arguing that a
holding company parent cannot be held liable for a
subsidiary’s negligence based on its set financial goals.
Rejecting Clark’s argument, the state supreme court
remanded the case back to the trial court.